Question

Upton Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, Long and Short, about which it has provided the following data: Long Short Direct materials per unit$15.00 $48.80 Direct labor per unit$17.60 $51.20 Direct labor-hours per unit 0.80 2.40 Annual production 40,000 20,000 The company's estimated total manufacturing overhead for the year is $4,547,200 and the company's estimated total direct labor-hours for the year is 80,000. The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below: Activities and Activity MeasuresEstimated Overhead Cost Direct labor support (DLHs) $3,081,600 Setting up machines (setups) 441,600 Part administration (part types) 1,024,000 Total $4,547,200 Expected Activity Long Short Total DLHs32,000 48,000 80,000 Setups1,220 1,900 3,120 Part types980 2,860 3,840 The unit product cost of product Long under the company's traditional costing system is closest to:

Answer 1

Answer:

Unitary cost= $78.07

Explanation:

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 4,547,200 / 80,000

Predetermined manufacturing overhead rate= $56.84 per direct labor hour

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 56.84*0.8= $45.47

Finally, the unitary cost:

Unitary cost= 15 + 17.6 + 45.47

Unitary cost= $78.07